Why Raising the Retirement Age Amounts to Robbing Millennials and Generation X’ers

An interesting article ran this week in The Atlantic regarding the impact that raising the retirement age will have on Social Security benefits. One of the more mind-boggling details was the fact that Millennials still seem to be in favor of Social Security, even though most are aware that they will never financially benefit from the program.

Americans like their Social Security benefits quite a bit: They oppose cuts to them by a margin of two to one. Even Millennials, who won’t be seeing benefits anytime soon, feel protective of Social Security, according to a poll from the Pew Research Center.

One way to effectively cut Social Security benefits is to raise the age at which they kick in. And yet, when asked specifically about raising the retirement age, Americans are mixed.

Perhaps confusion arises because “raising the age of retirement” sounds like a nice jobs program for older Americans, or an end to forced retirement. I sympathize with that position: Anyone who wants to retire later and work into old age should have a job. But that’s not what raising the retirement age would entail—the fact is, raising the Social Security retirement age represents a reduction in benefits: Because the monthly payments a person receives grow bigger the later in life he or she retires, raising the age cutoff reduces the total amount of money paid out.

I agree with the statement that “Anyone who wants to retire later and work into old age should have a job.” Social Security provides a disincentive for those who wish to remain working past retirement age.

Voters haven’t always been confused about this. In 2005, 77 percent of those polled by the University of Connecticut’s Roper Center opposed raising the retirement age. But in 2011, only 48 percent were opposed, and this year, a poll found that 78 percent of respondents were in favor of raising the retirement age to 68. This increase likely can at least in part be attributed to the presidential candidates, including Jeb Bush and Chris Christie, who are calling for such a raise.

Before we can see why raising the retirement age actually represents a cut in benefits, it’s necessary to understand how Social Security payouts are calculated. Participants can start collecting benefits beginning at age 62, but they get a boost to their monthly benefits—the equivalent of a 6 percent increase per year—for waiting until they’re 67. (Sixty-seven is the retirement age for anyone born in or after 1960, and that’s the figure I’ll be using in the example that follows.) After 67, that bonus increases to 8 percent per year, for each year until age 70. All told, those yearly rewards add up to a 44 percent increase in monthly benefits between retiring at 62 and retiring at 70. Retiring at any age before 70 results in permanently lower benefits for life, making 70 the best age to start collecting benefits (unless a person is in ill health and doesn’t expect to live for very long); a guaranteed, inflation-protected return of at least 6 percent per year is unheard of in stock markets.

What is not mentioned is that as you move past the current retirement age, fewer Americans will actually live to see their first Social Security payment. In the 2011 Actuarial Tables, more than 20% of men do not live to see age 66. Over 26% of men did not live to see age 70. Extending the retirement age means that fewer young Americans will ever receive benefits from Social Security. We know that when someone dies before retirement age, their benefits disappear.

Who benefits from this plan?

If raising the retirement age would only reduce this deficit by 12 percent, then why are some Republican candidates pushing it so hard? The answer is that it appeals to two types of people: employers, who would get to hire from a larger labor pool, and hard-line members of their party, who ardently desire any cut to government spending.

Who stands to lose out from this plan are the millions of Generation X’ers and Millennials who will have to postpone receiving benefits that would not remotely resemble the deal that previous generations enjoyed. All the more reason for young Americans to ditch their support of Social Security and demand the choice to Opt-Out.

-R.J. Renza, Jr.

Take a moment and sign the National Petition to Opt-Out of Social Security. The more signatures we gather, the more pressure we place on Congress and our political leaders.

This past month marked the release of my first e-book “How Are You Not Angry Yet: How Social Security is Destroying the Futures, Finances and Hopes of Generations X,Y and Z and How We Can Put and End to it,” which takes on Social Security from the perspective of young America in a visceral and humorous way. “Angry Yet” breaks down the complex topic of Social Security into a way that most Americans can easily understand and find entertaining and is available here.